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Old 12-19-2008, 10:31 AM
 
Location: Vermont
4,751 posts, read 9,235,349 times
Reputation: 1970

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I got the payoff request quote from my current bank.

Their numbers do not match up with my simple interest calculations.

They are telling me amount due on 1/15/09 is 309,687.32. My calculations suggest that amount due on 1/1/09 is 308,413.20 , so I am not sure how that got to me $1274.12 higher?

Our loan amount was $313,600, with a first payment on 10/1/07. Is it possible that interest accrued from time of closing, until 10/1/07 so when I put these numbers in a mortgage calculator, they are not coming up the same? I thought that is what PRE PAID INTEREST is for.... which was paid in cash at closing.

Secondly, we are being charged "Note interest" of $2264.16. I have no clue what this is.... I thought the interest we pay is the simple interest on the loan!!!! When we got the loan, we did make sure the loan had no pre-payment penalties. This is my local bank that has not been willing to budge on the interest rate (stuck at 6.0 fixed for 30 years...).

I am waiting to hear back from my bank, but thought I should get a jump on what is going on here...
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Old 12-19-2008, 10:34 AM
 
21,742 posts, read 37,240,355 times
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It is not even two years. Have them print the full amortization and see that it matches your records.
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Old 12-19-2008, 10:43 AM
 
Location: Vermont
4,751 posts, read 9,235,349 times
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I'll ask them when they call me back. A typical mortgage loan is compounded monthly, right? My monthly payment of $1880 suggests it is monthly. Every calculator I am checking comes up with the same number. Am I correct with regard to how the pre-paid interest works? The only way I could see it otherwise is if I was accruing interest before my first payment, and thus my initial loan amount was higher than the number I put in.

Could it be that in 15 days, it is accruing $1274.12 of interest? what about this Note interest stuff?

Last edited by joe moving; 12-19-2008 at 11:14 AM..
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Old 12-20-2008, 11:02 AM
 
Location: MID ATLANTIC
4,034 posts, read 8,748,550 times
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(ADVANCE APOLOGIES, I DID NOT READ CLOSELY, SO IF THIS IS LEFT FIELD OR DUH, PLEASE ACCEPT THE APOLOGIES).

Mortgage payments are paid in arrears, or after the fact. So, if you want a payoff for 1/15/2009, you will be charged interest from the last payment (December 1,2008) to the date of payoff (1/15/2009), roughly 45 days interest. (BTW, banks use a 360 per year for per dium interest).

The only time interest is prepaid is the month that you close in. This is to get you set up on the arrears calendar. So, if you close Monday, the 22 of December, you will pay interest from the 22 to the 31st. No payment on Jan 1 is due, because January interest is due Feb 1, 2009. (paid in arrears or after the fact).

Your payoff is always higher than the balance, and a quick calculation I use is the current balance plus one month's P&I.

Not sure if my comments help or hurt......but this is an area of constant confusion.
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Old 12-20-2008, 02:37 PM
 
Location: Vermont
4,751 posts, read 9,235,349 times
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Thank you - I did not know that.

Your explanation to me suggests that the 45 days of interest is described in: "note interest", since my interest per diem is roughly 51 dollars; 51 dollars * 45 days = $2295, matches up very closely with the "note interest" charge of $2264.00. However the loan balance still doesn't make sense to me. Why would the payoff be an entire payment larger than the loan balance in addition to this 45 days interest payment?
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Old 12-21-2008, 07:41 AM
 
Location: MID ATLANTIC
4,034 posts, read 8,748,550 times
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At the very beginning of my career, this was one of my earlier mental roadblocks in finance - decades ago (and probably why I understood immediately what you were saying).

There are a couple of possibilities here - one being a payment has not been credited in the payoff you are viewing. The payoff should state the date of the last payment received.

Then, if FHA on the old loan, you will pay the entire month's interest for the month you close in, regardless of the date you close. This is why sellers go into fits when a settlement date is missed. Suddenly, another entire month's intereest must be added (FHA's version of a prepayment penalty, btw).

Escrow shortages.....I am assuming that is not the case, as that would have it's own line item.

And not to say mistakes are never made, but there is one time ALL bankers fear, regret and I avoid if at all possible during this period, the annual audit. FWIW, the accountability is huge, not only to the insurance corps (FDIC, PMI, HUD), but to the regulatory agencies, and then, various accounting firms, hired by the aforementioned. The permitted variance is something insane, like $.02. So, even if a mistake were made, it's likely to be found. Small comfort, I know.
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Old 12-21-2008, 08:28 AM
 
Location: Vermont
4,751 posts, read 9,235,349 times
Reputation: 1970
Thank you again for the explanations. It's funny that in all of the web sites I've read about re-financing I've never seen any warnings of these "unexpected" costs. Possibly it should have been common knowledge but it was not for me. I simply took my loan balance as of Jan 1, 09, and added closing costs of about $3000 to it and thought that was going to be it. Then all of a sudden I've got an additional $3538 - so it is good to learn and understand about these things for next time. I'll see if the bank can clarify the loan balance.
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Old 12-22-2008, 09:54 AM
 
Location: Vermont
4,751 posts, read 9,235,349 times
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Hello, I spoke with my bank today.

First this makes me realize the value of a local bank. I leave a message and they call me back same day, or next day, ALWAYS. I really wish they could have accommodated a better rate for me, and I tried very hard, calling them 4 times to make sure they could not even budge or meet in between, etc.

Anyway, the # is high, because they assumed that I would not make a 1/1/2009 mortgage payment. I feel that while I am still under obligation to pay this note, this would be delinquent so I was planning on making the payment for 1/1/09 and wait for a refund for the over payment. In addition, if for some reason we do not close, then I can continue to pay my old mortgage ON TIME.
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Old 12-22-2008, 01:39 PM
 
Location: MID ATLANTIC
4,034 posts, read 8,748,550 times
Reputation: 3042
Default Thanks for the feedback and one more thing......

Excellent, that explains it. A payment basically was not credited.

And I am saying this loudly for everyone's benefit......

DO NOT EVER LET ANYONE TELL YOU NOT TO MAKE A PAYMENT THAT IS DUE......OR, I GUESS I MEAN DON'T LISTEN TO ANYONE THAT SAYS THAT UNLESS YOU ARE 100% SURE THE PAYOFF WILL BE POSTED IN TIME OR YOU CAN HANDCARRY IT THERE IN TIME.

An owner occupied property has a right of rescission, or the right to change your mind about proceeding with the refinance. It's a 72 business hour cooling off period. Your old loan will not be paid during this period, nor will the new loan w/ your new lender fund until this cooling off period is over. (Also, most lenders require your lock to cover this timeframe). It's almost unheard of for this 72 hour cooling off period to be waived. Only after this period will the payoff go to the old lender.....and then it has to get there, add another 2 days minimum.

If you miss your payment, it's NOT THE ATTORNEY OR TITLE COMPANY'S FAULT, it's not your loan officer's fault, IT WILL BE YOUR FAULT, particulary if you go beyond the 30 day mark. You may get someone else to eat the fees, but they are not obligated to do so.

I bring this up because way too many people get suckered into not making a payment and then are totally shocked when they are hit with the late fees, or worse, the late credit rating......

Head's up and beware.
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Old 12-23-2008, 04:13 PM
 
Location: Vermont
4,751 posts, read 9,235,349 times
Reputation: 1970
Thanks again for the replies.

I wonder if you know what my obligations are to the bank, having submitted an application for re-finance. I paid for the appraisal myself and that has happened already. I locked in at 5.0 with 1 pt. Right now (or at least yesterday... and probably tomorrow!) I am able to get 5.0 or lower with 0 points.

The new bank said I can float down once, after the appraisal comes in. There is probably some where some number below 5.0 (say 4.75 for example) with 1 point is better financial than 5.0 with 0 points.... but that will take a while, I haven't done the math yet. If for some reason they say sorry we can't get you that 4.75 with 1 pt, and can't drop your point, can I walk away?
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